Restrictions On Using Food Stamps Do Not Make Economic Sense

Food Stamps are a very important means for ensuring minimum nutrition of poor households, but there are a number of restrictions placed on the way these Food Stamps can be used. The aim is to ensure the efficacy of this scheme. Economic principles tell us that these restrictions are neither likely to be effective, nor make any difference. They may not be worth the trouble.
Restrictions on Using Food Stamps do not Make Economic Sense
Source - Wikimedia Commons (https://commons.wikimedia.org/wiki/File%3ASNAP_Benefits_Paid_2005-2012.png)

Benefits under the Supplementary Nutrition Assistance Program (SNAP), provided by way of electronic benefit card, but still commonly referred to as ‘food stamps’, as the program used to be called prior to 2008, are an important part of social assistance offered to the economically least privileged. It is a program that transfers the benefits to the most needy by a well defined criteria for need testing, and transfers benefits with minimal transaction costs.

While it cannot be doubted that SNAP or food stamps are both important and very useful as a well targeted subsidy, there are certain aspects of the design

of this subsidy, that are more rhetorical than effective. One of them is the restrictions on how these benefits can be used.

Food Stamps: Benefits under the SNAP

Food stamps are monetary benefits provided with the sole objective of supplementing nutrition of those Americans who do not have the money to buy themselves proper nutrition. To ensure that this benefit is not wasted for other purposes, a number of restrictions are placed on the use of food stamps.

Objective of Nutritional Supplement : Policy & Law

Section 2 of the Food & Nutrition Act of 2008 describes the policy of U.S. Congress for initiating the Food Stamps program in these words,

"To alleviate such hunger and malnutrition, a supplemental nutrition assistance program is herein authorized which will permit low-income households to obtain a more nutritious diet through normal channels of trade by increasing food purchasing power for all eligible households who apply for participation."

Section 3 (k) of the same Act defines 'food' in this way,

"Food means (1) any food or food product for home consumption except alcoholic beverages, tobacco, and hot foods or hot food products ready for immediate consumption ...., (2) seeds and plants for use in gardens to produce food for the personal consumption of the eligible household,..."

It goes on to add a number of conditions and restrictions that govern the use of food stamps.

Restrictions on Using Food Stamps

As the policy and the law that governs the food stamps program makes it explicit and clear, the food stamps are a benefit provided for a very specific purpose - the nutritional well being of the nation, and nothing else. Thus, food stamps are very different from all other kinds of assistance and benefits where the recipient has sole rights on how to use them. In the case of food stamps, they can only be used for the purpose of purchasing certain food that will add nutrition to the diet of the household.

Food Items that can be purchased using food stamps

1. Foods for the household to eat, such as:

  • breads and cereals
  • fruits and vegetables
  • meats, fish and poultry; and
  • dairy products

2. Seeds and plants which produce food for the household to eat.

Food Items that cannot be purchased using food stamps:

  • Beer, wine, liquor, cigarettes or tobacco
  • Any non-food items, such as:
  • pet foods;
  • soaps, paper products; and
  • household supplies.
  • Vitamins and medicines.
  • Food that will be eaten in the store.
  • Hot foods

Other Restrictions on using Food Stamps

Certain restaurants can be authorized to accept food stamp benefits from qualified homeless, elderly, or disabled people in exchange for low-cost meals, and certain organizations can collect food stamp benefits for providing meals and food to old or disabled eligible persons. However, food stamp benefits cannot be exchanged for cash in any case.

Another restriction imposed on food stamps is for online purchases made on the Internet. As of now, this facility of using Electronic benefit transfer (EBT) cards for food stamps on the internet is generally not made available due to problems and issues of security. However, some states allow access to EBT card accounts online to


see the total benefits account of the household. It must be mentioned that pilot projects in this directions have raised of this restriction being removed some time in future.

The food stamp benefits added to your account for the month, if unused would be carried over to the next month, but there are restrictions on this too. If these benefits continue to remain unutilized beyond 9 to 12 months (depending upon the state), then the food stamps office may initiate the process of removing those benefits from your account. So these benefits cannot be accumulated indefinitely, and must be utilized within a certain time frame of 9 to 12 months.

Why Restrictions on Use of SNAP Benefits do not make Economic Sense

In economic theory, subsidies can be classified as two types. The first is indirect subsidy, which is provided in the form of reduced price of certain goods in respect of which subsidy is provided. Most often, this form of subsidy is provided to the supplier, in such a way that the market price of that good will fall. More targeted indirect subsidy is provided in some public distribution systems, where the supplier is compensated for quantities sold to the target underprivileged group. Indirect subsidy has two major disadvantages – it is generally not very well targeted, and it often leads to pilferage as well as wastage.

These limitations of indirect subsidy are generally addressed by well targeted direct subsidy, wherein monetary benefits are transferred to the needy directly, making them better off than before. It has several advantages. In particular, it is largely free from wastage, and if well targeted, it can also be free from pilferages.

The food stamps or the SNAP benefit is a monetary benefit, which makes it in effect a direct subsidy. Such subsidy works best when it is not linked with any particular commodities. However, unlike other direct subsidies, food stamp use is highly restricted. The question is can it work to achieve its desired consequences, particularly since food is an essential item.

Think of an instance where a person wanting to use food stamps to buy beer is restricted from doing so. What he ends up doing is to buy beer from his other resources and use food stamps to buy food, which he would have bought with this own resources otherwise. Thus, the restrictions may not be very useful. Further, they can also distort consumption behaviour. A person who already has food items may get forced to buy more of it since he can neither store SNAP benefits nor use them for other purposes. This would actually make the beneficiary worse off compared to a scenario where there were no restrictions.

This is why, the restrictions on food stamps do not make much economic sense!



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